Mortgage

COMMERCIAL PROFITS FOR COMPANIES ON MORTGAGE

What are the guidelines to sell a commercial (operating and profitable) business company that is currently under mortgage for five years?

What are the guidelines to sell a commercial (operating and profitable) business company that is currently under mortgage for five years?

Guidelines for selling a business are not within my expertise but one thing popped out at me.

You say that the business is under mortgage. Now I have never heard of the lender taking the entire business as security though I suppose that it could be done. I am pretty sure that it is your premises that are subject to a mortgage. In that case, your balance sheet will show the cost of the building less depreciation as an asset and the mortgage will show as a liability.

To a prospective buyer, that building, even though mortgaged, may seem like a good thing as increases in occupancy costs are limited to taxes, insurance, etc. How many businesses have you seen go out of business because they lost their lease? Another buyer might look at it as a burden tying up capital that could be better used invested in your core business.

A buyer will do their own evaluation. The value of the building, less the mortgage, will be a factor in the valuation. Maybe it will be a major factor, maybe minor.

I hope that helps.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button